Best columns: Business

Corporate tax cut won’t create jobs

Marcus Ryu

The New York Times

“I am what certain politicians call a ‘job creator,’” said Marcus Ryu. As the co-founder and CEO of a Silicon Valley software firm, I employ more than 2,000 people in “high-skilled, high-paying jobs.” President Trump has claimed that reducing the corporate tax rate will encourage entrepreneurs like me to start new firms, which will in turn turbocharge job growth. That’s simply not the case. People launch companies for all sorts of reasons: a smart idea, a chance to strike it rich, a desire to be your own boss. “I have never heard someone say, ‘I would have started a company, but tax rates were too high.’” I can imagine a tax regime that would actually discourage entrepreneurship, but that’s not what we have in the U.S. Our tax rates on capital gains—which is how most startup founders make money—“are already far lower than rates on ordinary income.” In fact, Apple, Microsoft, and Amazon were all launched at a time of higher tax rates. If Washington is truly serious about encouraging economic growth and job creation, it should “look elsewhere besides the tax code for answers.” We could invest in our schools or our crumbling infrastructure, or make the internet and power grid safer and more resilient. My team is eager to grow our business. But “lowering the corporate tax rate isn’t going to make us create jobs any faster.”

Making economics more human

Roger Lowenstein

The Washington Post

Richard Thaler, who won the Nobel Prize for economics this week, turned the dismal science “on its head,” said Roger Lowenstein. Often called the father of behavioral economics, Thaler was one of the first to incorporate insights from psychology to show that humans don’t always act rationally when it comes to money, as economic models rigidly assumed for decades. His pioneering research demonstrated that people are often predictably irrational, consistently behaving in ways that defy economic theory. Pre- Thaler, economists assumed that people believed it was either “worth spending 30 minutes to save $20— or it was not.” Thaler showed that people “would drive across town to buy a cheaper sweater—yet not think of doing so to save $20 on an automobile,” even though the $20 saved was the same. Economists used to believe that a person who found $100 on the street would dutifully deposit the cash in a savings account. “Thaler knew that if he ever found that bill, he would splurge on dinner.” He’s also credited with showing how people can be “nudged” to make better decisions, such as saving more for retirement through default deposits. Economists haven’t abandoned their rational-man models. But thanks to Thaler, they increasingly “put down their formulas and look out the window to see people as they really are.”